Yellen vs. Summers

It appears Federal Reserve Chief Ben Bernanke will not get a third four-year term. The reported top candidates to succeed him are economist Janet Yellen and Larry Summers. What do we know about these two individuals? N.C. State University economist Mike Walden responds.

“Very well qualified. They’re both PhD. academics, have taught at the universities. Mr. Summers, for example, at Harvard, Ms. Yellen in California.

“Ms. Yellen is now actually the number two person at the Federal Reserve. Mr. Summers has served in a number of high level positions going back to the Regan Administration, the Council of Economic Advisors, Chief Economist of the World Bank, Treasury Secretary under President Clinton and then most recently head of the National Economic Council under President Obama.

“So, they certainly have the credentials, and what people are trying to do is perceive, Where might they take the Fed? When people look at Ms. Yellen, they say she’s been at the Fed now for several years, so she’s been voting in essence to support what Ben Bernanke has done. So many of them think that if she were appointed, it would be maybe Ben Bernanke number two; that she would continue his policies. That may not be a fair characterization but many people are saying that.

“Others look at Larry Summers and say he’s a little bit of an unknown in terms of Federal Reserve policy. He’s spent all of his time looking at what we call fiscal policy, federal budget, etcetera. And people are trying to figure out where each would come down in terms of their stance on what’s called the dual mandate the fed has.

“On one hand, the Congress has told the fed keep inflation low. On the other hand, they’ve said keep unemployment low. And sometimes you can’t do both at the same time. Right now people think that Ms. Yellen would be more focused on keeping unemployment low, and maybe Mr. Summers would be more focused on inflation rates, but we don’t know. This is clearly one of the most important decisions the President will make.”